A new year, a new story?

Investors faced a challenging 2018, particularly during the fourth quarter, as rising trade tensions, increasing US interest rates, and concerns around slowing economic growth weighed heavily on the markets. Emerging market equities in particular struggled for the year, falling more than 14%.

As we look forward to 2019, it may be helpful to review how emerging market equities have behaved following each negative rolling 1-year period over the past 30 years. Historically, after a negative year, the market turned positive over the next 12 months 78% of the time. The chart below shows how the average 1-year market downturn of -17% was followed by market upturns that averaged 4%, 9%, and 20% over the subsequent 3-, 6-, and 12-month periods, respectively.

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Source: Morningstar, for the period Dec. 31, 1988 to Dec. 31, 2018. Index data based on MSCI Emerging Markets Index (gross).

What this means for investors:

If we consider past as prologue, it may be a good time to reconsider emerging markets. Last year's challenges may obscure the long-term attractiveness of these developing economies as they continue to benefit from a rising consumer class, structural government reforms, and a mix of well-run businesses.

To learn more about emerging markets as a solution for growth, visit Define Your Destination and find out what your investments can help you achieve.

Source: Morningstar


Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.

International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

The views expressed represent the Manager's assessment of the market environment as of Dec. 31, 2018 and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the Manager's views.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index designed to measure equity market performance across emerging market countries worldwide. Index “gross” return approximates the maximum possible dividend reinvestment.


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